An Antidemocratic Approach to Democratic Governance

By all estimates, Forest House would not survive 1960. The Bronx settlement house that had helped build new public housing, launched a health center, provided day care to hundreds of families, convened neighborhood meetings on racial integration and offered after-school art classes during the 1950s now found itself struggling with financial mismanagement and lackluster fundraising from a beleaguered board of directors. United Neighborhood Houses, the umbrella agency for all settlement houses around New York City, looked likely to close it.

The problem was not that Forest House had no money, it was that the nonprofit had no flexible money. The settlement house had secured $150,000 in City and state grants and contracts to help underwrite programming for 1960, but government regulations limited funding for overhead expenditures required to run an organization. Forest House needed $15,000 to pay for things like rent or a bookkeeper — costs not covered by a government grant but without which the nonprofit could not function. As the board president of United Neighborhood House, Stanley Isaacs, explained, Forest House’s services “are literally essential to the area, but would cease if Forest House did not exist as an administrative agency, to supervise and carry on the work involved.”

That the organization operated on the brink of closure despite winning major government grants reveals a critical gap between what public dollars covered and what nonprofits needed to deliver programs.

The financial precarity at this one settlement house was hardly unusual. If anything made Forest House unusual, it was the fact that private donors rescued it. Isaacs reached out to budding philanthropists on the Upper East Side who found the chance to leverage public investment with a private donation particularly compelling. Within days, they had transferred $15,000 worth of stock to Forest House. Few nonprofits are so fortunate; few donors are so responsive.

To many, this was a happy ending — what one person involved called a “lifesaver” for the organization and, by extension, the people who depended on it for services. Forest House was put on a path to financial stability with the influx of cash, new oversight from United Neighborhood Houses and the recruitment of a new board to continue fundraising from both public and private sources. With such measures in place, it later became, in the words of a local reporter, a “colossus” in applying for and winning federal anti-poverty grants under President Johnson’s 1964 War on Poverty program.

Impressive though it was, Forest House’s turnaround serves as a cautionary tale for the 21st century when government grants continue to both underwrite and constrain nonprofits. This may be a “good” story of philanthropy saving a valued neighborhood entity, but Forest House’s near-death experience is equally a story about the limitations of a public-private approach to urban governance and poverty reduction. Had no private donors stepped forward — the far more likely scenario — thousands of Bronx residents would have lost access to publicly funded goods and services. This raises practical concerns about how to meet the needs of poor New Yorkers, as well as philosophical ones about the shortcomings of an approach to governance in which public goods are delivered via private entities, predicated on the whims of donors and contingent upon success in competitive grant programs.

Indeed, at the very moment Forest House exposed the flaws in relying on private entities to deliver public goods, the federal government dramatically expanded government grantmaking.

The failures of top-down urban renewal (what James Baldwin famously called “Negro removal”) during the 1950s prompted the Kennedy and Johnson administrations to adopt a more participatory, people-centric, neighborhood-based approach to cities. Specifically, they followed the “opportunity theory” of two Columbia University faculty members, Richard Cloward and Lloyd Ohlin, who diagnosed the problem of poverty as one of limited access to opportunity and upward mobility. They proposed to increase pathways through job training, social services and improved school curricula, and to do so through community-based nonprofits. This approach, which had already found favor at the mighty Ford Foundation, embraced behavioral modification as a route out of poverty and effectively avoided structural reform in favor of action at the local level.

The resultant programs — Ford’s Gray Areas program, Kennedy’s President’s Committee on Juvenile Delinquency and Youth Crime and Johnson’s War on Poverty — all operated within a shared intellectual and administrative framework that made grants directly to nonprofit organizations through competitive, short-term programs. It was a moment of simultaneous state expansion through social welfare provision and contraction through reliance on private organizations. An administrative history by the Johnson-era Office of Economic Opportunity highlighted this purposeful embrace of nonprofits: The poverty program, the document reads, “was designed specifically to involve organizations outside the structure of government” and demonstrate how private nonprofit institutions “would do more and more of the public business.”

As I trace in “Nonprofit Neighborhoods: An Urban History of Inequality and the American State,” there were reasons why partnerships with nonprofit organizations made for — and still make for — good urban governance. Given the legacies of exclusion in the United States, many saw local, private provision as more participatory and as ensuring more diversity in urban governance. (To the extent that reality matched this expectation, it was largely due to the sustained activism by people in poverty who demanded a voice in directing programs aimed at improving their lives and positioned government grants as a new terrain for civil rights activism.) Yet, as was evident at Forest House and reaffirmed in decades since, government grants proved a burdensome benefit.

Nonprofits in and beyond New York City today will recognize the challenges Forest House faced over half a century ago. They know from experience that to have a government grant, contract or loan is no guarantee of organizational stability and can, in fact, contribute to instability. Reforming grant and contracting systems would be a welcome step. As archival evidence makes plain, nonprofit leaders have been pleading with government funders for decades to cover overhead expenses, negotiating as best they could and finding ways to maneuver within limits. As one executive director lamented in the 1960s, “Moving the ‘feds’ on this has been like moving the Rock of Gibraltar.”

But there is also a larger set of questions raised by the near collapse of Forest House half a century ago that technocratic proposals to reform government grant proposals leave unanswered: Can grants — a form of resources rooted in scarcity, structured in a competitive program, operating on short-term horizons and expecting private assistance — deliver goods and services deemed a right and not a privilege? What happens to neighborhoods and their residents lacking a nonprofit skilled in the art of grantsmanship, or those whose populations are deemed unimportant or whose strategies are deemed unproductive? The inadequacy of government grants positions elite donors as the ultimate arbiters of need and priority. Such deference to private funders is a particular concern given the racialization of wealth and poverty in the United States. Data are quite clear that donors and foundations consistently underfund Black-led organizations which, given the persistence of racism, work on the front lines to address systemic poverty.

Forest House may have been rescued, but the privatized, elite-dependent means by which Bronx residents received basic goods and services persists with remarkable continuity across the United States. That dynamic will most likely expand under a second Trump administration. The immediate chaos of the attempt to freeze all federal grants may have passed, but the grant-in-aid system is clearly in the administration’s sights. Whatever the next action is, nonprofits and communities together will feel the brunt of government budget cuts. A reliance on private donors will become all the more important for organizational survival and all the more troubling as a means of meeting the needs of urban residents. What an antidemocratic means of democratic governance.